Covid–19 and Commercial Leases


The Mandatory Code of Conduct: SME Commercial Leasing Principles (‘the Code’) is old news now however negotiations and agreement between parties based on the code is a continuing and evolving thing.

The intent of the Code is that parties will share the financial risk and cashflow impact of the COVID-19 period and the parties will enter into temporary arrangements guided by the Code.

Queensland is in the process of legislating to enforce the Code. The Code will apply to a Commercial Lease if the Tenant is suffering financial stress or hardship as a result of the pandemic and:

  1. Is a Small to Medium Enterprise with an annual turnover of less than $50 million; and
  2. Is eligible for JobKeeper payments.

 The Code will apply for the duration of the JobKeeper program.

Any relief sought by a Tenant must be proportionate to that suffered. There are many leasing principles that will apply under the Code, and it is expected that during this period:

  1. Rent relief be given to Tenants in the form of rent waivers of rent deferals;
  2. Security is not called on by Landlord’s for a Tenant’s breach of the Lease;
  3. Leases are not terminated due to non-payment of rent and penalties are not enforced for failure to trade;
  4. Tenant’s must comply with their substantive obligations under the Code to obtain relief.

There are many potential issues that arise when negotiating rent relief under the Code and all amendments to Commercial Leases must be documented in writing, taking into account the terms of the applicable Lease.

Over the past month we have drafted and negotiated a number of Rent Holiday Deeds. It is extremely important that any rent reduction is agreed to in such a Deed as it provides both parties with some security in this uncertain and unprecedented time.  The Deed operates alongside the lease and does not impact the other terms and conditions of the commercial lease agreement.  All other terms and conditions of the lease are applicable and must be followed.

If you are a commercial landlord or tenant negotiating a rent reduction under the Code then please contact us to formalise this in a way that is binding on both parties.

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For any commercial enquires please contact the team at Miller Sockhill Lawyers Maroochydore.

Covid–19 and Commercial Leases - Miller Sockhill Lawyers
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